Back in 1965 Congress launched the Federal Family Education Loan Program (FFELP) to give financial assistance to students. One element of this program is Stafford loans which were initially designed to help only those students in very real financial need but which now make up over 90% of all Federal Government education loans.

Over time Stafford loans have altered with changing conditions and today there are two main forms of the loan – subsidized and unsubsidized.

In the case of subsidized loans the Government accepts responsibility for the payment of interest accruing on a loan from the date on which the loan is issued until the date on which the student has to start repaying the loan. Usually a student does not have to make repayments as long as he is enrolled on a program of study that is classed as being a ‘half-time’ or greater program and for a grace period of up to six months after the end of his course. A student can however begin to make payments at an earlier point if he wishes to do so.

Since the interest is subsidized, loans are usually granted only on the basis of need and officials will look at both a student’s and his family’s income when determining whether or not the student qualifies for a subsidized Stafford loan. Students have to fill out a Free Application for Federal Student Aid (FAFSA) application form that includes details of income and each student will then be given a number called the Expected Family Contribution (EFC) calculated from the income figures provided.

About two-thirds of all subsidized Stafford loans are granted to students whose parents have an Adjusted Gross Income of less than $50,000 a year. Another one-quarter are provided to families in the $50-100,000 a year bracket. At this point however the meaning of ‘need’ becomes somewhat blurred and slightly under one-tenth of subsidized loans are provided to students with a combined family income of greater than $100,000.

In the case of those students who do not qualify for a subsidized loan most will be eligible for an unsubsidized Stafford loan. The main difference here is that students will be required to meet the interest payments on the loan, though once more payment do not generally start until six months after the completion of the student’s program of study.

An unsubsidized Stafford loan can be quite costly as the interest accumulates over the period of study and so the capital sum for eventual repayment will also increase. Let us consider a very simplified example.

Let us assume that a student borrows the sum of $5,000 at the start of his first year and that the interest rate is 6.8%. At the end of the year the interest accrued is $340 which will be added to the loan. In the following year the student will then accrue interest on $5,340 at 6.8% which will come to some $363 raising the total debt after two years to $5,703. This example is not wholly accurate as interest is calculated and added monthly but it does nevertheless demonstrate the principles of this form of loan.

Dependent upon the amount of money that is borrowed every year and the time before repayment starts it can be seen that a student can pay a reasonably high price for delaying the repayment of a Stafford loan.

Despite this apparently high cost it must be borne in mind that a lot of the alternative methods of meeting the cost of a college education are considerably more costly and that a lot of students would not be able to afford to go to college without a Stafford loan.

By: Donald Saunders

It is imperative that you pay off your student loans in time. This is because the government has been having difficulties dealing with the many defaulted loans over the past several years. As a result, they are getting more diligent in their efforts to have them paid.

If your student loans are not paid off, the government can seize your income tax refund or even garnish your income wages. In some extreme cases, the loaners can go so far as taking control of your property, in order to get the money owed them.

To help prevent these horrors from happening to you, you can pay a little bit of the loan even while you are still attending school. That will lessen the burden later.

You can also apply for grants while in school too. Grants don’t have to be paid off. Or maybe do some part-time work to help pay the loan.

The biggest problem with any loan is the huge interest added on. Paying off some of the loan early will help to lessen that weight considerably.

One good strategy when paying off student loans while still in school, is to pay off the smallest loan amount first. If you have several loans, paying off the smallest one first will be better than paying them all a little at the same time. It means one fewer headache when you leave school.

Another good strategy is to pay off your non-subsidized loans first. Non-subsidized loans are those where you owe the interest, as opposed to subsidized where the government pays the interest. The interest is the biggest problem to pay in loans, more than the principle.

So combine the two strategies and pay off your lowest non-subsidized loans first. Then your lowest subsidized loans afterwards.

In addition to giving you less of a headache, paying your loan while still in school in increase your credit rating. Then by the time you leave school and get a great paying job, you could have a big chunk of your loans paid off, and have great credit. Then you can pay off the bigger loans with the bigger interest.

One final suggestion: never use Peter to pay Paul. That is, don’t let money from one loan or a credit card pay off another loan or credit card. Take it from me, it doesn’t work in the long run.

But do the best you can to pay off something from your student loan while still in school. You’ll be happy you did.

By: Jim Konerko

Now that you are aspiring to pursue college studies, you would need financing various expenses through a loan. And surely the loan must come at lower interest rate so that you are not at all under any stress of repaying it. Well, there are many sources where from a student can find low interest college loans depending on his or her personal circumstances.

The best considered source of low interest college loans are federal student loans. These loans can be categorized under Perkins loan, subsidized or unsubsidized Stafford loans. A student can choose these loans as per his or her prevailing circumstances. But one common feature of these loans is their lower interest rate as these loans are federal loans. Perkins loans are made to students in greatest needs. Such a student does not repay the loan until he or she completes education. Perkins loans are of lowest interest rate. Stafford subsidized loans are funded by the government and hence interest rate is very low. Unsubsidized Stafford loans are meant for all type of students and interest payment continues throughout the loan repayment duration.

Those who fail to avail Federal loans; they can borrow money through private lenders. These lenders offer college loans at low interest rate on certain condition. For instance, secured loans are of lower rate. Parents will have to pledge home or any valued asset as collateral of secured student loans to get it at low rate. Also, parents past credit history should be good. There are many online lenders providing low interest college loans. You can search them on internet.

In case a student is tagged bad credit, he or she should take private student loan with a co-signer who has excellent or good credit history. The lender may reduce interest rate as the repayment responsibility is with the co-signer. These are some of the aspects of low interest college loans that you should keep in mind prior to applying for it.

By: Julia Russell